We’re in a recession, and there is no way of avoiding it. High street stores are closing left, right and centre and finding a job appears harder than ever. Your education is one way to single yourself out when it comes to job-hunting, but unfortunately knowledge is not free. Though here in Scotland we’re lucky to get help towards our tuition fees, the cost of living and the tools required to study effectively could still amount to a fairly hefty debt. If you study south of the border you have your tuition fees to pay too, adding further to the total cost. Not everyone is fortunate enough to be able to fund their education independently, and will therefore turn to a student loan to help cover the costs.
It could be argued that some level of debt is almost inevitable for every student. According to a survey recently conducted by YouGov on behalf of Money Advice Service, students in Scotland can expect to graduate with a debt of £12,500. The UK projected student debt average is £23,700.
24-year-old Kevin Anderson, a post graduate student at the University of Strathclyde said that: “Debt isn’t something you think about or are even told about whilst in school. The reality of it only hits you when you actually get to uni.” This seems to be the opinion of many other students too.
What is student debt?
As a student you can borrow money from a number of different sources. Student debt is the stuff you have to pay back, the total amount of money you borrow: your student loan from SAAS, overdrafts on your bank account, credit cards, store cards and any career development loans you get for the bank. There are also ways to acquire funding which do not have to be paid back. SAAS, as well as some universities, offer some bursaries and grants. The criteria to receive a grant or bursary can vary, so check with your university and on the SAAS website to see which financial help you’re entitled to.
What about interest?
Kirsty MacInnes from the student funding department of Glasgow Caledonian University said: “Your student loan is the best loan you’re ever likely to get.” This is because student loans are not the same as commercial loans. The government pays the actual cost of interest on all student loans, meaning they have a much lower interest rate than a loan from a bank or a building society. The interest added to the amount you owe varies depending on inflation, which is an economical term meaning the general prices of goods and services in an economy over a period of time. This means that though it seems like you’re paying back more than you borrowed, the amount you pay back is meant to be the same in real terms as the value of the amount you borrowed.
Elsewhere, interest rates might not be so favourable. APR (annual percentage rate) on credit cards, interest on short-term loans, overdraft rates and store card APRs can be higher. The longer you take to if you take to repay what you’ve borrowed with credit and store cards, the more you have to pay back, and the higher the percentage quoted, the more you’ll have to pay back in the long-run, so it’s best to keep your borrowing to a minimum.
How do you pay your loan back?
The Student Loans Company has a statement on their website which, with all the jargon, can be pretty difficult to get your head around. “You start repaying the student loan once your course is completed,” explains William Curry from the Student Loans Company. “Once you’re earning £15,795 a year, and it comes off your pay automatically. The threshold may change year by year, but that is the current salary for loan repayments to begin. How much you pay back depends on what you’re earning”. Most students will repay their loans through HM Revenue and Customs, either by employers taking amounts from pay through the PAYE system or through the tax self-assessment process. Once you’re earning £15,795 a year you will begin repaying, and 9% is then deducted on any earnings above this amount. You can also make voluntary payments, at any time, direct to the Student Loans Company. More information can be found on SAAS’s website.
If you’re concerned about anything to do with your loan, bursary or grant all you need to do is call SAAS (the Student Award Agency for Scotland) or the Student Loans Company and ask. They are there to help you.
How can you manage your budget?
In order to avoid owing any more money than is absolutely necessary, there are a few steps you can follow to try and manage your cash. The best way to make your money last is to be organised and budget. Try and set yourself a budget of £50 a week. This includes your food, nights out, emergency coffee and cheeky new clothing purchases. It may seem like a lot to some of you, and if that’s the case then fantastic. Try and withdraw the £50, so you know that that is your cash for the week and that is physically all you should spend. The best bit about this method is if you’re under budget one week; whack the extra money on the next week and vice versa. Saving your money one week allows for more spending the next! This method might not work for everyone, but if your bank balance is looking desperate then it’s worth a shot.
“Having a budget and sticking to it means your spending never exceeds your income. Make sure your rent and bills are paid first the remainder is what you have to live on, then look at ways of stretching your money, buy cheaper brands, take a packed lunch to university, do you need to take the bus is your campus a walkable distance? There are smarter ways of spending your money and making sure you get the best deal possible,” advises Kirsty MacInnes.
How about making a food plan? If you plan your meals for the week you can avoid irrationally buying all the buy one get one free deals in the supermarket. It’s also a great idea to split your meals with your mates – splitting the bill by four is considerably cheaper than shopping solo. Buy a flask and taking your tea/coffee to the library rather than splurging on your Starbucks. It really is the little things which count, so try and curb your spending and then you’ll have less to pay back in the end.
The amount of debt you leave university with is pretty scary, but you shouldn’t let it get in the way of the best few years of your life. There are means to budget your spending and your student loan is quite unique in that you only have to start repaying it back when you can afford to, which actually isn’t as daunting as you might think according to ex-student, 23-year-old Kirsty Smith. “Paying back my student loan wasn’t half as scary as I first thought,” she says. “You literally just tell your employer that you recently graduated and they do the rest! The best thing about it, is that it comes straight out of your salary so you don’t even notice it.”
One of the best things about a student loan is that you don’t need to begin repaying it until you are financially able to, so though the figure you owe might seem ever-growing, you can and will pay it off. The repayment system is designed to suit you, so in small, manageable chunks and with plenty of help along the way you will get rid of your debt.
Every university will have a student support department – contact them for advice on managing your funds.
SAAS repayment information
0300 555 0505
Student Loans Company